Steel company executives and union leaders say they are delighted by President Bush’s decision to impose tariffs as high as 30 percent on imported steel, but steel customers warn that the levy will haunt the nation’s economy.
The tariffs were a victory for the United Steelworkers of America, which aggressively lobbied the administration to stop the flood of cheap steel from overseas.
“This decision raises our hopes that the American steel industry can be saved,” said Leo Gerard, president of the steelworkers union. At a press conference, he joked that he was dancing “on the head of a pin.”
The union had also pushed for relief of the industry’s crushing retiree health-care costs. Past union contracts gave costly health-care benefits to retirees, and the expense, coupled with other problems, is driving some steelmakers to the edge of extinction. But the administration did not address that issue.
“Six hundred thousand steelworker retirees still remain at risk” of losing their health insurance, Gerard said. He called for the administration to use the proceeds from the tariffs to keep retirees insured, saying they are “the true victims of the last five years of illegal steel imports.”
Weirton Steel, the West Virginia steelmaker, is another beneficiary of the tariff.
The company has not earned a profit since 1999, when the price of steel dropped due to the financial crisis in Asia. Exporters around the world, unable to sell their steel domestically or to Asian customers, began cutting prices to sell steel in the U.S.
Weirton Steel CEO John Walker said steel prices would rise because of the tariff, but remain reasonable. “Prices will still be below where they were pre-crisis,” Walker said. “But most [steelmakers] should be cash-flow positive.”
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A positive cash flow means a company is earning more money than it spends, but because of factors like depreciation it doesn’t necessarily mean a company is profitable.
But that is too late for many who used to work at the steel mill in Weirton, W. Va. The mill now employs 4,000 people, down from 5,000 a year ago.
Higher prices mean that things made of steel, whether a can or a car or a corkscrew, will cost more to make.
That makes business tough for companies like Precision-Marshall Steel Co. The company is highly specialized, grinding and milling raw plate steel for customers.
“We think [the tariff] could very likely cost us business revenue and possible loss of employment,” said Sherman Ackerman, marketing director for Precision-Marshall. Ackerman said the market for his firm’s product will not accept a price increase to compensate for the higher price of raw material.
The company is based in Washington, Pa., and operates a warehouse in Bolingbrook. Although it buys steel from U.S. mills, it also buys from mills in Austria, France and Germany.
“We will try to live through this,” Ackerman said.
Christopher Olin, an analyst for Midwest Research, said the effects of the tariff might be more muted than expected.
Olin said many foreign steelmakers would simply regard the tariff as a tolerable cost of doing business.
Nor will the tariff make the U.S. steel industry particularly healthy, Olin said, unless it can overcome the problem of retiree health-care costs.
“There are inevitable bankruptcies to come,” he said.
Longtime steelworkers, some employed and some not, gathered at union halls in East Chicago, Ind., to talk about the tariffs. Many wore red buttons reading “40 Percent–Stand Up For Steel,” souvenirs from a Feb. 28 rally in Washington, D.C. The “40 percent” referred to the across-the-board tariff the steelworkers hoped to obtain.
Told that 30 percent was as high as the government would go, Paco Godinez, a worker in Ispat Inland Steel Corp.’s No. 7 Blast Furnace section, said it was better than nothing.
“What is it now? Zero. So even if it’s 30 percent, it’s a little help,” Godinez said. “If we make Inland profitable, we have more opportunities to get what we ask for with [the next] contract negotiations.”
But Floyd Kinsey, who works in Ispat Inland’s No. 3 Cold Strip East section, said 30 percent isn’t enough because U.S. steel operates at a disadvantage.
“What I’m hearing is other countries are subsidizing their steel producers,” he said. “That’s unfair to us because our government doesn’t subsidize us.”